As Part III have pointed out, the regulatory framework for directly overseas listing is not sufficiently clear, and the regulatory requirements are not sufficiently explicit. For most small-and-midium-sized enterprises, the channel to build an international-capital platform is unsmooth. Thus, in the current situation, it is required to make the complete consideration about perfecting the regulatory framework, improve the regulatory regimes and practice.
Firstly, the regulatory framework should be refined. （i） In view of that the continuous information disclosure of H-share companies is regulated by overseas securities regulator or stock exchanges, it is recommended to timely revise the Several Opinions on Information Disclosure. On the one hand, the author propose to cancel the provisions requiring H-share companies to report or submit as record the important events to the CSRC; On the other hand, the author suggest setting up a regulatory regime by which H-share companies regularly reports to the CSRC, by this way the proper domestic regulation of H-share companies can be kept, while the compliance burden of H-share companies can be reasonably relieved. （ii） The regulatory documents such as the Notice on Listing on Overseas Main Board, the Guidelines on Listing on the HKGEM, the Notice on Spin-off Listing and the Notice on Share Registration etc shall be integrated by the CSRC into a new regulation, so as to set up a unified regulatory requirements. （iii） It is recommended to timely check up the regulatory documents and repeal the Report of Overseas Issuance and Listing and the Notice on 1995 Annual General Meeting.
Secondly, regulatory regimes shall be perfected. （i） Soften the overseas listing conditions, ease the requirement on some aspects such as net assets, profit after tax and expected financing amount etc, and allow Chinese enterprises to accomplish the directly oversea listing by means of equity replacement etc, so as to create reasonable environment for domestic enterprises to flexibly employ overseas capital platform. （ii） Based on Article 238 of the PRC Securities Law （2005 revision）， timely revise the Special Provisions and institute a new regulation. On the one hand, the provisions inconsistent with the PRC Company Law （2005 Revision） shall be cancelled; On the other hand, the rules divorced from the development of practices shall be revised. （iii） Based on CSRC’s regulatory principles for directly overseas listing, it is advised to lapse the regulatory regimes aiming at protecting the interests of oversea investors, such as the regulatory rules of dispute resolution and applicable laws etc. （iv） Coordinate the regulatory requirements for H-share companies and that for A-share companies, to efficiently reduce the compliance burden of cross-border listed companies.
Finally, the administrative permit program shall be simplified and standardized, and the transparency of regulatory process shall be enhanced. （i） At the same time of reserving the administrative permit item for H-share IPO, it is recommended to consider cancelling other administrative permit items or simplifying the reviewing process; （ii） It is recommended to define clear regulatory conditionts and requirements and set clear review period in the new regulation in which the Notice on Listing on Overseas Main Board, the Guidelines on Listing on the HKGEM, the Notice on Spin-off Listing and the Notice on Share Registration are to be integrated, so as to form a due process of regulation. （iii） Restrict “window guide” and other unnecessary regulatory intervention to raise the level of marketization of directly overseas listing.
Conclusion
In order to protect China’s nantional economic security and the general interests, and ensure the compliant operation of H-share companies, it is necessary to regulate the direct overseas listing of Chinese enterprises to a certain extent. However, the domestic regulatory power shall be exercised in harmony with overseas regulatory power, and respect the market force. There exist a lot of problems in China’s domestic regulation of direct overseas listing, which are substantial obstacles for Chinese enterprises to be directly listed overseas. As such, there is a pressing need to refine the regulatory framework, clarify the regulatory standards, and improve the regulatory efficiency and increase the transparency of regulatory process.
【作者简介】
刘轶，南开大学经济学院副研究员，硕士生导师，主要研究国际金融法。
【注释】 According to Article 3 of the Provisions of the State Council on Domestically Listed Foreign Capital Shares of Joint Stock Limited Companies (promulgated by Order No. 189 of the PRC State Council on December 25, 1995 and effective as of the date of promulgation) and other relevant regulations, B shares mean shares issued by a joint-stock limited company in registered form with par value denominated in RMB, subscribed and traded in foreign currencies, and listed on a domestic stock exchange. In general, shares issued by a joint-stock limited company with par value denominated in RMB, subscribed and traded in RMB, and listed in a domestic stock exchange are called RMB ordinary shares (A shares). There are no any other kind of shares that are issued and traded in the securities market of the PRC Mainland.
See Main Points of the Economic System Restructuring of 1993(drafted by the original State Commission for Restructuring the Economic System(SCRES), and promulgated by PRC State Council on March 8, 1993), the Chinese version is available at
http://news.xinhuanet.com/ziliao/2005-03/18/content_2713741.htm>.
According to Article 3 of the Special Provisions of the State Council on the Issuance and Listing of Shares abroad by Joint-Stock Limited Companies (promulgated by Order No. 160 of the PRC State Council on August 4, 1994 and effective as of the date of promulgation, hereinafter the Special Provisions), H shares mean shares issued by a joint-stock limited company in registered form to overseas investors with par value denominated in RMB, subscribed in foreign currencies, and listed on an overseas stock exchange. At the early stage, the target market for Chinese companies’ direct overseas listing was confined to the HKSE, so shares listed in Hong Kong by these companies are called “H shares” (taking the first letter of Hong Kong). Subsequently, as different ways of overseas listing have been adopted and the locations of overseas listing have diversified, H shares refer commonly to shares issued and listed overseas by a joint-stock limited company incorporated in the PRC Mainland. In practice, Chinese enterprises that have issued H shares and have been listed on an overseas stock exchanges are referred to as H-share companies.
In the“A+H”offering plan, the offering of A shares and the offering of H shares are governed by different laws, are not conditional upon each other and are not subject to clawback mechanism. As such, “A+H”offering plan includes two independent offers.
The features of the“First A then H”offering plan are that the offering of A shares and the offering of H shares commence simultaneously, the price ranges are determined simultaneously but the H-share price will be fixed after the A-share price is determined and H shares will be listed following the listing of A shares. The adoption the above operational approach can ensure the offer price of H shares will not be lower than that of A shares and is favourable to the convergence of the trading prices of A shares and H shares of the company listed both domestically and abroad.
Promulgated by the PRC State Council on April 22, 1993 and effective as of the date of promulgation. Before the promulgation of the PRC Securities Law (1998), the Provisional Regulations set out the legal framework for the regulation of issuance and trading of shares in the PRC Mainland. It is essential to note that some rules of the Provisional Regulations are inconsistent with the relevant provisions of laws enacted subsequently, such as the PRC Securities Law (1998), the PRC Securities Law (2004 Revision) and the PRC Securities Law (2005 Revision). However, the Provisional Regulations have not yet been repealed. Under this circumstance and based on the principle of higher-level laws taking precedence over lower-level laws, where the provisions of the Provisional Regulations are inconsistent with those of higher-level laws, the latter shall prevail.
Both the SCSC and the CSRC were established in October, 1992. The former is the competent authority responsible for the unified macro administration of securities markets. Its director is the premier of the PRC State Council and its commissioners comprise the persons-in-charge of 13 relevant departments such as the People’s Bank of China. The latter is the executive body under the SCSC. In April, 1998, the SCSC and the CSRC merged and the latter, being the entity directly under the PRC State Council, is responsible for the centralized and unified regulation of the national securities and futures markets.
Adopted at the Sixth Meeting of the Standing Committee of the Ninth National People''s Congress on December 29, 1998, promulgated on the same date and effective of July 1, 1999.
Revised at the Eleventh Meeting of the Standing Committee of the Tenth National People''s Congress on August 28, 2004.
Adopted at the Fifth Meeting of the Standing Committee of the Eighth National People''s Congress on December 29, 1993, promulgated on the same date and effective as of July 1, 1994.
Revised at the Thirteenth Meeting of the Standing Committee of the Ninth National People''s Congress on December 25, 1999.
Revised at the Eleventh Meeting of the Standing Committee of the Tenth National People''s Congress on August 28, 2004.
Adopted at the Eighteenth Meeting of the Standing Committee of the Tenth National People''s Congress on 27 October, 2005, promulgated on the same date and effective as of January 1, 2006.
As regards the minimum number of sponsors, Article 75 of the PRC Company Law (1993) stipulates that there shall be more than five sponsors for the incorporation of a joint-stock limited company. Article 6 of the Special Provisions stipulates that there may be less than five sponsors in a joint-stock limited company insorporated by way of promotion. As regards the qualification of H-share investors, the PRC Company Law (1993) does not impose restrictions on the qualification of investors to which a joint-stock limited company makes a public offer of H shares. Article 2 of the Special Provisions stipulates that H shares can only be subscribed by overseas investors. As regards law application and dispute resolution, the PRC Company Law (1993) does not provide for the method to resolve company disputes involving the holders of H shares and the applicable laws for resolving such disputes. Article 6 of the Special Provisions stipulates that company disputes involving the holders of H shares shall be handled according to the resolution method prescribed by the Articles of Association of the company and the laws of the PRC shall apply.
The SCREC was established in May, 1982 and acted as a comprehensive authority responsible for the study, coordination and guidance of the reforms on economic system under the PRC State Council. In 1998, the SCREC was converted to a lower level institution - the Economic Restructuring Office of the PRC State Council (EROSC). In 2003, the EROSC was abolished and and its reform function was taken by the National Development and Reform Commission (NDRC) under the PRC State Council.
Jointly promulgated in Zheng Wei Fa No. 21 by the SCSC and the SCREC on August 27, 1994 and effective as of the date of promulgation.
Promulgated in Zheng Jian Fa Xing Zi No. 83 by the CSRC on July 14, 1999.
Approved by the PRC State Council on September 6, 1999 and promulgated in Zheng Jian Fa Xing Zi No. 126 by the CSRC on September 21, 1999.
These regulatory documents include: (a) Provisional Measures for the Administration of Reduction of State-owned Shares for Raising Social Security Funds (promulgated in Guo Fa No. 22 by the PRC State Council on June 6, 2001, hereinafter the Measures for the Reduction of State-owned Shares); (b) Notice on the Approval and Circulation of China Securities Regulatory Commission’s “Report on Issues Relating to the Overseas Public Offer of Shares and Listing of Domestic Enterprises” (issued in Zheng Wei Fa No. 18 by the SCSC on April 9, 1993, hereinafter the Report of Overseas Issuance and Listing); (c) Notice on Issues Relating to the Foreign Exchange Regulation for Enterprises Listed Overseas (jointly issued in Zheng Jian Fa Zi No. 8 by the CSRC and the State Administration of Foreign Exchange (SAFE) on January 13, 1994); (d) Notice on Several Issues Relating to the Holding of 1995 Annual General Meeting and the Amendment of Articles of Association by Companies Listed Overseas (jointly issued in Zheng Wei Fa No. 5 by the SCSC and the SCREC on March 29, 1995, hereinafter the Notice on 1995 Annual General Meeting); (e) Several Opinions on the Further and Proper Handling of Information Disclosure Work by Companies Listed Overseas (issued in Zheng Jian Fa No. 18 by the CSRC on March 26, 1999, hereinafter the Several Opinions on Information Disclosure); (f) Opinions on Further Promoting the Regulated Operation and Intensive Reform of Companies Listed Overseas (jointly issued in Guo Jing Mao Qi Gai No. 230 by the State Economic and Trade Commission and the CSRC on March 29, 1999); (g) Working Guidelines for Secretaries of the Boards of Directors of Companies Listed Overseas (issued in Zheng Jian Fa Xing Zi No. 39 by the CSRC on April 8, 1999); (h) Notice on Issues Relating to the Further Improvement of Foreign Exchange Regulation of Overseas Listing (jointly issued in Hui Fa No. 77 by the SAFE and the CSRC on August 5, 2002); (i) Notice on Issues Relating to the Regulation of Overseas Listing of Enterprises Subordinated to Domestically Listed Companies (issued in Zheng Jian Fa No. 67 by the CSRC on July 21, 2004, hereinafter the Notice on Spin-off Listing); (j) Notice on Issues Relating to the Centralized Registration and Deposit of Non-overseas Listed Shares of Companies Listed Overseas (issued in Zheng Jian Guo He Zi No. 10 by the CSRC on March 28, 2007, hereinafter the Notice on Share Registration); and (k) Provisions on Strengthening the State Secrets Protection and Archive Management Work Relating to Overseas Issuance of Securities and Listing (jointly promulgated in Zheng Jian Hui Gong Gao No. 29 by the CSRC, the Administration for the Protection of State Secrets and the State Administration of Archives on October 20, 2009).
See Garcimartín Alférez, Cross-Border Listed Companies, Martinus Nijhoff Publishers, 2007, pp. 113-117.
For example, the Several Opinions on Information Disclosure requires that any H-share company must report to the CSRC as record important events information and so on that are disclosed according to the securities laws of the target market; Any H-share company must notify the CSRC prior to the change of its chairman of board, chairman of board of censors, general manager, financial manager and so on. See the Several Opinions on Information Disclosure, Part II.
Under China’s legislative system, the Notice on Listing on Overseas Main Boards exists at a level lower than the administrative rules instituted by the CSRC, and the Guidelines on Listing on the HKGEM exists at a level lower than the administrative regulations instituted by the PRC State Council, but higher than the administrative rules of the CSRC. The enactment of the administrative regulations and the administrative rules must comply with legally prescribed procedures, while there is not any procedural requirement as for the enactment of other regulatory documents either by the PRC State Council or by the CSRC.
Besides these quantitative conditions, Part I of the Notice on Listing on Overseas Main Boards also defines some qualitative conditions for overseas direct listing including: (a) conformity with Chinese laws, regulations and rules for overseas listing; (b) the usage of the funds raised shall conform to industrial policies and foreign-capital utilization policies as well as the state provisions on the establishment of fixed assets investment projects; (c) the corporate governance is normative, the internal control system is effective, and the senior management is relatively stable with high management level; (d) the dividend distribution after the overseas listing shall be secured by reliable sources of foreign exchanges, according to relevant state provisions on the regulation of foreign exchanges; and (e) other conditions prescribed by the CSRC.
According to Article 33 of Measures for the Administration of Initial Public Offering and Listing of Stocks (promulgated by Order No. 32 of the CSRC on May 17, 2006, and effective as of May 18, 2006), the conditions for A-share IPO and listing in domestic market include but not limited to: (a) having a positive net profit of over CNY 30 million accumulatively for the latest 3 accounting years; (b) having a net cash flow of over CNY 50 million accumulatively, or having a business income of over CNY 0.3 billion accumulatively for the latest 3 accounting years. Relatively, the conditions of listing in Hong Kong are more flexible. The listing conditions stipulated by Chapter 8 of Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited include but not limited to: (a) having the business record not less than three accounting year, the profit within the latest year not less than HKD 20 million, the total profit within the former two years not less than HKD 30 million, and the market value of at least HKD 0.2 billion when listing; or (b) having the business records not less three accounting years, the profit within the latest year of HKD 0.5 billion at least, the total cash influx of operation activities in the former accounting 3 year is HKD 0.1 billion at least, the market value when listing is HKD 2 billion at least; or (c) having the business record not less than three accounting year, the profit within the latest year not less than HKD 0.5 billion, and the market value of at least HKD 4 billion when listing, and the number of stockholders of not less than 1000 when listing.
See Article 20 of the Special Provisions and Article 103 of PRC Company Law (2005 Revision).
Article 4 of the PRC Arbitration Law (Adopted at the Ninth Session of the Standing Committee of the Eighth National People''s Congress on August 31, 1994, promulgated on the same day, and effective as of September 1, 1995) provides that: “The parties adopting arbitration for dispute settlement shall reach an arbitration agreement on a mutually voluntary basis. An arbitration commission shall not accept an application for arbitration submitted by one of the parties in the absence of an arbitration agreement.” Article 145 of the PRC General Principles of the Civil Law (Adopted at the Fourth Session of the Sixth National People''s Congress on April 12, 1986, promulgated on the same day, and effective as of January 1, 1987) provides that: “The parties to a contract involving foreign interests may choose the law applicable to the settlement of their contractual disputes, except as otherwise stipulated by law”; and Article 146 requires that: “The law of the place where an infringing act is committed shall apply in handling compensation claims for any damage caused by the act. ”
See Article 5 of the Measures for the Reduction of State-owned Shares and Article 5 of Executive Measures for the Transferring of State-owned Shares for Raising National Social Security Funds (jointly promulgated in Cai Qi No.94 by the Ministry of Finance, the SASAC, the CSRC and the NCSSF on June 19, 2009). At the beginning, the reduction of state-owned shares shall operate during both A-share issue and H-share issue. By reason of negative reflections appear in domestic stock market after the implementation of the Measures for the Reduction of State-owned Shares, the PRC State Council stop the reduction of state-owned shares in domestic market in June, 2002.
See Article 55 of the Mandatory Provisions.
See Article 103 of the PRC Company Law (2005 Revision), and Articles 54 and 55 of Guidance on the Articles of Association of Listed Companies (2006 Revision) (promulgated in Zheng Jian Go Si Zi No.38 by the CSRC on March 16, 2006, hereinafter the ''Guidance on the Articles of Association'').
See Article 93 of the Mandatory Provisions.
See Article 118 of the Guidance on the Articles of Association.
By the end of 2009, there have been 70 H-share companies simulatenously listed on the SHSE or on the SZSE.
See Regulation on the Approval by the Federal Service for Financial Market of Offerings and/or Trading of Securities of Russian Issuers Outside the Russian Federation, approved by Order No. 06-5/pz-n of FSFM Russia, dated January 12, 2006.
See M. Tison, ''Unravelling the General Good Exception: The Case of Financial Services'' in M. Andenas & W. H. Roth eds., Services and Free Movement in EU Law(Oxford University Press, 2002) , 352.
